Counterintuitive

I give up.

Listen, folks: whenever I offer predictions about the economy, just pretend I'm talking out of my ass, okay?

I mean, what the hell is going on? The U.S. dollar is soaring when any sane economist would have said it would crumble. (You can't just print money by the billions without devaluing the money you have, can you? Can you?) The greenback's stomping the almighty hell out of our currency, which is trading below 80 cents U.S. That last is supposedly due to commodity prices, primarily oil, plummeting--which is in turn supposed to due to a drop in demand. 

Despite all my Peak Oil musings, the price of oil's down below US$70/bbl as I write this--less than half its record price set just three months ago. Has demand for oil been cut in half? I think not. 
Here's an attempt at an explanation from people I trust at TheOilDrum.com. One of the biggest factors seems to be this credit crisis we've found ourselves in. As with seemingly everywhere else in the economy, people aren't anxious to sell to the next link down the supply chain until they're positive they'll be paid. 

May I digress for a minute? It never occurred to me until recently how ridiculous, how utterly fucked up, our whole economy is. I mean, the whole thing is built on credit, i.e., money you don't have. Back in my ultraconservative days, one of my mantras was "run government like a business!" Pshaw. Run everything--government and business--like a family. A sensible family, that is (if there are any of those left), one that doesn't have thirty-eight different credit cards and is in hock up to their eyebrows. Sure, maybe that means the economy can't expand at light-speed and make a few people extremely rich, but the point is, it's sustainable--unlike this mess we have crashing down around us now. 

The Oil Drum is predicting extreme volatility in the price of oil (and by extension, just about everything else) in the coming months and years. (An image popped into my head as I wrote that: a guitar string, tuned three octaves past its normal pitch, thrumming, thrumming, thrumming, snapping...) 

They warn specifically that OPEC will move to reduce supply very shortly, and that continuing credit concerns will eventually impact the supply side as well; so contrary to  all appearances, "happy motoring" isn't likely to last. 

Also contrary to appearances, the drop in prices isn't necessarily a good thing, not if it signals the onset of deflation. Here are two---articles explaining the concept. The first is quite detailed, geared towards those fluent in Martian who are nonetheless confused about something that wasn't even on the radar a year ago. The second is more of a primer, with limited Martian. It's easy to conclude from both that we are indeed on a deflationary path, which is deeply ungood.

Mike Shedlock, over at Roubini's site, puts in this way: "you can not patch a busted dam with water, no matter how hard you try". They've tried printing money by the billions of dollars--which would normally lead to inflation, if not hyperinflation--and it hasn't done much of anything. Yet the U.S. dollar stubbornly remains high in comparison to other world currencies. Reuters says that's due to "repatriation of capital from emerging markets, falling commodity markets, relentless banking stress and hopes for a U.S. government fiscal boost to its economy" (emphasis mine).

Ah, yes, another fiscal boost to the economy. A few more of those things and we'll all be having dishrag soup for dinner.

Stay tuned, everyone...expect the unexpected, and prepare for a wild ride.